Sunday, 22 November 2009

Responding to risks: Eliminating risks

Clearly, if a risk has potentially negative consequences, then eliminating it is the best alternative. Given the choice, we would like to live without the potential for downsides to occur.

In business terms, this is clearly the most desirable action to take - it reduces management effort both now and in the future if you don't have to worry about a particular risk any more.  However, this is seldom possible - few risks can be eliminated completely, and some risk is going to be present in nearly every business situation.,

The key to considering elimination is the risk profile.  As we've seen, any risk that involves a fatal downside is a strong candidate for elimination, since the occurrence of the downside, however low its probability, is totally unacceptable. 

We would not choose to play a dice game that might bankrupt us.  In business terms this might equate to changing manufacturing processes that endangered people's lives in some wqay.  However unlikely the outcome, it would not be acceptable simply to tolerate the risk. 

Eliminating a risk may involve doing things in completely new ways.  If significant business change is involved in getting rid of a risk, you may need to consider what new risks will be created as a result.

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